President Joe Biden addressed America’s inflation woes ahead of the much-anticipated April consumer price index (CPI) report. He unveiled several solutions that he believes will curb today’s inflationary environment and expressed his sympathy to the millions of Americans who have to suffer this economy, whether it is pain at the pump or increasing costs at the supermarket.
“All they’re focused on, understandably, is the problem they’re facing,” the president told reporters when pressed why the public blames him for 8.5% inflation. “They know a lot of it is extremely complicated. They’re frustrated. I really don’t blame them. There’s a lot we have to do.
“What I have to do is explain in simple, straightforward language what’s going on,” he added.
The president thinks that many of his efforts will successfully grapple with higher inflation, including trimming the budget deficit and making investments in household utility bills. Biden also attempted to contrast this administration with many of the proposals proffered by the so-called Ultra-MAGA Republicans in Congress, including Senator Rick Scott’s (R-FL) economic plan that aims to make all Americans “pay some income tax to have skin in the game, even if a small amount.”
The White House had released a fact sheet on its efforts to trim price inflation and lower energy prices. Most of the chief proposals have already been discussed or introduced into the public policymaking arena, such as releasing one million barrels of crude oil per day from the Strategic Petroleum Reserve (SPR) for the next six months, addressing the supply chain bottlenecks at the nation’s ports, and doubling down on his overall green energy agenda.
Multiple surveys revealed that Biden and the Democrats are polling poorly on the issue of the economy and inflation, with most Americans noting that the president is most responsible for inflation and skyrocketing prices. So, will any of these policy mechanisms help the people they are intended to aid?
Will This Help?
While the benign efforts like lowering childcare costs and energy bills are merely giving money from your left hand to your right, it is the meat and potatoes of taxing unrealized gains, slapping a penalty on wealth, and even prescription drug price controls that will lead to economic consequences and chaos in the marketplace.
Although a billionaire tax is being marketed as a way to help the impecunious, this campaign would ultimately harm the middle class, retirees, and smaller companies. Remember, folks like Warren Buffett, Jeff Bezos, and Elon Musk do not keep their billions in a bank account down the street or under their mattress. Well, perhaps Musk, as a way to troll the financial system, but the point still stands. They have their net worth parked in stocks, non-profit organizations, and venture capital. By slapping a fee on success, they will inevitably draw down on their Amazon or Tesla holdings, effectively lowering the share price and hurting shareholders, from the Robinhood kids to the seniors trying to pay for retirement.
Perhaps the silliest tax scheme emanating from Washington’s brilliant men and women is a tax on unrealized capital gains. The idea goes like this: If investors’ holdings of Acme International have yielded a 35% return by Dec. 31, they will be mandated to give a slice of these gains to the state, even if they had yet to hit the “sell” button. But there are many questions: What if traders buy and hold these equities until retirement? What if the stock gains 40% in one year and then collapses 50% the following year? Why should the public believe that a tax on realized capital gains will only target billionaires?
The administration has proposed “allowing Medicare to negotiate drug prices, capping insulin costs, penalizing drug companies that raise prices faster than inflation, and making other needed reforms to lower prices.” These are trendy ideas among the public on both sides of the aisle. Of course, these will be successful pursuits in the short term, and everyone will take a victory lap, but they will lead to consequences in the future, much like milk and crude oil in the 1970s. It is nothing more than interventionism, believing that price controls will be a magical panacea to higher costs for consumers when, in reality, it is nothing more than a nostrum. One thing most economists agree on is that price controls harm the very people they are supposed to help, so why would pharmaceuticals be any different? They will not. The only thing that will be achieved is slower drug production, struggling smaller producers, lower research and development, and a bailout to bail out the government’s failed policies in the future.
Consider what eminent economist Ludwig von Mises wrote in 1944’s Omnipotent Government: The Rise of the Total State and Total War:
“The isolated measures of price fixing fail to attain the ends sought. In fact, they produce effects contrary to those aimed at by the government. If the government, in order to eliminate these inexorable and unwelcome consequences, pursues its course further and further, it finally transforms the system of capitalism and free enterprise into socialism.”
Intervention Begets Intervention
More than a century ago, President Woodrow Wilson installed the income tax. It was initially designed as an emergency revenue-generating scheme that homed in on a narrow base, mostly the wealthy. Like the ratchet effect, the income tax metastasized into essentially every American who earns an income without any signs of the confiscatory measure on labor winding down. The Biden administration’s proposals to combat inflation will not achieve much to fight higher prices because it is more of the same. Interventions led to today’s inflationary environment, and the White House thinks expanded meddling will solve a soaring consumer price index (CPI). When those intercessions lead to other problems, the Oval Office will propose other interventions. It is a vicious cycle that spawns a wide array of other issues in the broader economy. It is not Bidenomics – it is Swamponomics at its finest.